Pending Sales of U.S. Existing Homes Rise Less Than Forecast

Rising property values may encourage more Americans to put their homes on the market and help increase the number of available dwellings. Photographer: David Paul Morris/Bloomberg

May 30 (Bloomberg) -- Fewer Americans than forecast signed
contracts in April to buy previously owned homes, indicating
limited inventory is holding back further progress in the
housing market.

The index of pending home sales rose 0.3 percent after a
1.5 percent gain in March, figures from the National Association
of Realtors showed today in Washington. Economists forecast
April contract signings would match the prior month’s increase,
according to the median estimate in a Bloomberg survey.

Growth in the labor market and cheaper borrowing costs have
helped sustain housing demand, showing residential real estate
will remain a source of strength for the economy. Rising
property values may encourage more Americans to put their homes
on the market and boost the number of available dwellings.

“We’ve got pent-up demand out there from people who put
off purchasing a home, affordability remains very high,” Gus
Faucher, a senior economist at PNC Financial Services Group Inc.
in Pittsburgh, said before the report. “Housing is, and will
be, an important driver of overall economic growth through the
rest of 2013 and into 2014.”

Estimates for pending home sales ranged from a decline of
1.1 percent to an increase of 5.5 percent, according to 42
economists surveyed by Bloomberg.

Mortgage Rates

At the same time, mortgage rates that have been fueling
home sales are starting to increase and may work to limit
further gains in the industry. The average rate for a 30-year
fixed mortgage climbed to 3.81 percent in the week ending today
from 3.59 percent last week, Freddie Mac figures showed today.
In November, the rate reached an all-time low of 3.31 percent.

Economists consider pending home sales a leading indicator
because they track contract signings. Existing homes sales are
tabulated when a contract closes, usually a month or two later.

Two of four regions showed an increase in contract signings
from a month earlier, reflecting an 11.5 percent gain in the
Northeast and a 3.2 percent advance in the Midwest. Pending home
sales slumped 7.6 percent in the West and fell 1.1 percent in
the South.

The index level for pending home sales was 106 on a
seasonally-adjusted basis, the highest since April 2010, which
was prior to the deadline for a homebuyer tax credit. A reading
of 100 coincides with the average level of contract activity in
2001 and “historically healthy” home-buying traffic, according
to the NAR.

Housing Inventory

“The housing market continues to squeak out gains from
already very positive conditions,” the group’s chief economist
Lawrence Yun said in a statement. “Because of inventory
shortages, higher home sales will push up home values to the
highest level in five years.”

Purchases of previously owned homes also climbed, to a 4.97
million pace in April, the highest level in more than three
years, the Realtors group said this month. The median price rose
11 percent, the fifth consecutive month that property values
advanced more than 10 percent year over year.

Lack of inventory has held back sales and encouraged
purchases of new homes. Sales of new properties advanced 2.3
percent in April to an annualized pace of 454,000 homes, the
second-fastest pace since July 2008, the Commerce Department
said last week.

The economy is also creating more jobs. Payrolls expanded
by 165,000 workers in April after a revised 138,000 gain in
March that was larger than first estimated, Labor Department
data showed. The unemployment rate dropped to 7.5 percent, the
lowest since 2008.

Lowe’s Cos.

Mooresville, North Carolina-based Lowe’s Cos., the second-largest U.S. home-improvement retailer, is benefiting from
housing recovery.

“The housing market continues to show convincing signs of
life,” Robert A. Niblock, chief executive officer at Lowe’s,
said on a May 22 earnings call. While growth will be held back
by fiscal policy, such as a payroll tax increase that took
effect in January, “we do expect that the lagged effect of
recent gains in housing will benefit home improvement demand as
the year progresses,” he said.